Large and foreign-owned institutions may have difficulty extending relationship loans to informationally opaque small firms. Bank distress does not appear to affect small business lending, although even small firms may react to bank distress by borrowing from multiple banks

"We review how deregulation, technological advance, and increased competitive rivalry have affected the size and health of the U.S. community banking sector and the quality and availability of banking products and services. We then develop a simple theoretical framework for analyzing how these...